Chinese companies in several sectors – including energy, petrochemicals and agriculture – stand to benefit from surging oil prices and the yuan’s easing deflation, which analysts said could help investors find gains amid the negative effects of the Middle East war.
Petrochemical companies on mainland China’s exchanges, including Satellite Chemical and Guangdong Redwall New Materials, raised product prices to reflect the surge in oil costs, a move that sent their stock prices soaring. Fertiliser makers, agricultural firms and green-energy companies would also be good bets due to either their ability to pass on rising costs or increasing demand for alternatives, according to brokerages including Industrial Securities and Sealand Securities.
The US-Israel military raids on Iran and the closure of the Strait of Hormuz catapulted crude oil to around US$100 a barrel, spurring global stagflation concerns that reverberated across all asset classes. Stocks and bonds fell, while the US dollar rose on haven demand. With the risk-off mood prevailing, investors are scouring for the few sectors that can insulate them from the fallout.
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“If the blockade of the Strait of Hormuz persists, it will spawn a repricing of costs across industry supply chains and an acceleration of energy replacement,” said Zhang Xia, an analyst at China Merchants Securities. “Stocks like oil, petrochemicals and coal are set to benefit.”
Companies that are able to raise prices are defying sell-offs on the broader market. Among them, Satellite Chemical, a Shenzhen-listed maker of propylene and acrylic acid, surged about 5 per cent this week, extending a 15 per cent upsurge for the preceding five-day period. Shares of Guangdong Redwall jumped nearly 3 per cent for the week after it raised prices of concrete admixtures by between 50 and 80 per cent.
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Price increases were broad-based in the petrochemical industry, rising for 195 of the 336 chemical products tracked by GF Securities in the first week of March, according to the brokerage.
Brent and West Texas Intermediate oil prices have surged more than 60 per cent this year, with most of the gains seen over the past two weeks after the outbreak of the war. Goldman Sachs said that crude this year could challenge its record high of US$146 set in 2008, implying a further 25 per cent gain from the current level.
